The Retirement Systems of Alabama’s building on South Union Street in Montgomery, Alabama, as seen on February 8, 2023. It would be the first increase after 2016. (Brian Lyman/Alabama Reflector)
The Alabama education employees’ insurance board will seek an increase in their funded rates for the first time in nearly a decade.
Neah Scott, legislative counsel with the Retirement Systems of Alabama, said in a phone interview Tuesday that the requested rate increase for employers will go from $800 to $904, an estimated $134 million increase.
“That’s just an estimate, because it varies,” she said. “It depends on how many active employees employers have during that year.”
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The money would come out of the state’s Education Trust Fund budget. The current ETF is about $9.349 billion.
The Alabama Retired Education Employees Healthcare Trust Board previously approved a $118.9 million withdrawal for the Public Education Employees Health Insurance Plan to use.
Scott said the total estimated employer contribution amount for fiscal year 2026 is $1.13 billion. If the transfer from the Trust had not occurred, it would have been around $1.25 billion.
Scott said the reduction in Medicare funding from the federal government drove the request. Officials told legislators last month that the federal government was lowering its share of costs for prescription drugs in Medicare Advantage plans.
The last requested increase was in 2016, when the rate went from $780 to $800, Scott said.
State Superintendent Eric Mackey, discussing the Alabama State Department of Education’s budget request with reporters last week, said that the question of PEEHIP being fully funded was “the big bear in the road.”
“In my opinion, it needs to go up,” he said.
Mackey supports the increase but noted it would take an additional $100 million from the education budget.
“If they don’t do that, then the only other options, the retirees are going to have to pay significantly more for their health insurance and and right now, when there have not been retiree pay raises in some time, and they’re not going to be, because the money is really not there to do the raises,” he said.
Mackey said he couldn’t speak for lawmakers, but he doesn’t think they want to raise health care rates significantly.
“But then once that’s done, and then they have to decide if there’s going to be an offer of a pay rise or not, then we kind of figure out what we can prioritize,” he said.
A message was left with Rep. Danny Garrett, R-Trussville, chair of the House education budget committee Tuesday. Attempts to interview Sen. Arthur Orr, R-Decatur, chair of the Senate education budget committee, were not successful.
The Legislature will have the final say on budget allocations. The 2025 regular session, which will vote on 2026 budgets, will begin in February.
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